Overstone International Value Fund on Pason Systems Inc.
Thesis
Pason provides technology to oil and gas rigs and is currently operating against a depressed rig-count backdrop. The fund believes the company can still double revenue over the next five to seven years without needing a recovery in rig numbers. Growth is expected to come from pricing, greater product adoption and expansion of the newer well-completions segment. At around 12x normalised earnings, the fund considers the valuation attractive relative to that growth potential.
“Pason is expected to double revenues over the coming 5-7 years, driven by price, product adoption, and growth in the company’s well completions segment.”
Key risks
- Rig activity remains depressed
- Revenue growth depends on pricing, product adoption and execution in the newer well-completions segment